What is Product-Led Growth?

Product Dec 08, 2021

Think about the last time you bought a piece of software at your company, it doesn’t matter if you’re a one-man show startup or a 5000+ employees enterprise company. Apart from being bombarded by ads, content and other marketing communications, which undoubtedly helped in getting you to buy the product, you probably did something else, try it for free.

You explored the product, looked at every single one of its sections and probably put it to work a few times to experience the actual outcomes. You realize it’s amazing. It has a shallow learning curve. The user-interface looks great. And you can seamlessly get the outcome that you need. It feels like you’re in a dream and you have superpowers.

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Oh but wait...you’re now facing one of two problems.

First problem is the free trial is ending, and now you’re gonna have to pay to keep using it. Yikes. Or second problem, you realize that there are limits on how much you can use a particular feature on this free version, or that there are a lot more that would take your usage of the product to a whole new level. Regardless of the problem, you now have to make a decision that involves spending a few dollars.

You might have to discuss it with someone else, get an approval, or maybe the decision is solely up to you. In any case, the product you’ve just tried is so great that it would really be a dumb decision not to get it. Plus, the ROI is undebatable. So you take a deep breath, and inside your head you decide you’re definitely buying it.

The fascinating thing about the process you just went through is you haven’t spoken to a single salesperson. You’ve already made your decision, but you didn’t have to go through multiple meetings, a demo, or receive lots of emails from pre-made sequences. It was all a self-serving process, and the decision you made was all based around the product you just tried.

Welcome to Product-Led Growth!

By definition, Product-Led Growth is a focused growth model that relies on the product itself as the primary driver of customer acquisition, conversion, and expansion. The term was coined by OpenView’s Blake Bartlett back in 2016, who said that we were entering what he calls “The End-User Era.”

To find out how we got here, we need to think about the balance of power. What do we mean by that? Well, the power in the business world has experienced several shifts. First, from the vendor to the buyer, and from the buyer to the end-user. This last group expects amazing experiences when using a product, especially because nowadays trying a product is not costly, most of the time it’s even free. Just think about something like Product Hunt. It’s a free community where you can literally try various products in a single day.

The way to succeed in this End-User era is through Product-Led Growth, and there are definitely companies that are already reaping the benefits. One of the best examples of Product-Led Growth is Slack. Slack is genuinely built to create a fantastic user experience, and to deliver outcomes. The product doesn’t do anything out of this world, the technology itself is not cutting-edge or life-changing, but the experience is so positive, efficient, fast and with such an ease of use that it is hard not to fall in love with this product. I’ll unveil a small secret, actually: I usually frown upon companies that don’t use Slack, I simply can’t see a world where a business can work without it.

Product-Led growth definitely brings a lot of benefits for the end-user, but there are also huge upsides from the business standpoint too. Scalability is definitely one of them. Companies aiming for rapid-growth should go with Product-led growth to widen up their top of the funnel through freemium models or free trials. Just look at hypergrowth companies like Slack and Shopify. Another benefit is higher retention rates, which is huge to creating ARR. By using a Product-led growth, your users quickly understand the value of your product, and ensure expectations are aligned with the product’s features and capabilities.

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Product-led growth might not be for everyone

Product-led growth is great, but that doesn’t mean it is for every single company on Earth. Not everyone can implement and in some cases it might not even be the strategy that suits your company. For instance, you need to make sure that the product-market conditions are suitable, meaning that your marginal cost per user is low and that your users can be influencers in the buying decisions.

From a product standpoint, your product needs to deliver value almost immediately, with no help from company personnel. This means it has to be easy to use, and integrate seamlessly into your user’s workflow. Related to the immediate value argument, your product must be able to provide a good amount of value before the paywall. This is a tough part, because you need to define the limits. It cannot be too limited that your end-user doesn’t get a good taste of the product, but it can’t be too open to not make it worth it upgrading to the paid-version.

With this in mind you can decide whether Product-Led growth is right for you. If you consider that it is, and that you’re ready to embark in this new era, you’ll definitely see the benefits.